In the past It seemed a good idea at the time to take out an endowment policy on your mortgage when buying your home. The attraction was the lower rate of interest you had to pay on your mortgage which helped with money in your pocket and the added bonus of once the mortgage term was ended a large payment of cash would be paid to you from the policy once the mortgage was paid off. In 1986 the endowment policy was the bees knees of mortgages with over 80 per cent of mortgages being of this type.

However as these endowment policies were linked to the stock market, when the stock market took a big tumble so did all the endowment policies as well. The share prices plummeted so badly in April 2000 that they never really recovered. The insurance companies were forced with the decision to tell all of its customers that there could be a shortfall in their payments. The letter were sent out in code.

There were three colors; red were for polices where there was likely to be a serious shortfall. Amber was the color which said there may be a slight shortfall, and green for polices which were still on track to reach the projections made. between the dates of July 2001 and December 2002 over 4-3 million letters were sent out according to the Association of British Insurers. Of these letters, only a third that were sent out were actually green. The other two thirds were actually amber or red.

Many homeowners claimed that they were not told properly of the risks that were involved when they took out the policy. Some say they were not even aware that the policies were even linked to the stock market and they did they would never have taken the policy out in the first place. The term now used is the policy was mis-sold. Many have actually proven their case and received compensation as a result. There are still endowment mortgages available today as well as ISAs and unit linked mortgages. The advantage of the ISAs are you do not have to pay the big set up fees like the other endowment mortgages.

However you still have to remember that all of these types of mortgages are linked to the stock market so the risk is still there if the market does take a nose dive.

Interest rates are based upon the performance of stocks and bonds on the exchange markets that reflect how the economy is doing and how much confidence the American people have in the performance of available stocks. As stocks rise so do interest rates as consumer confidence reflects that people are willing to spend and have money to do so.

The factors of inflation and unemployment also affect interest that are set the federal reserve, who are the same institution that prints money and holds a supply of gold that is equivalent to the value of the money circulating throughout the world.

While people are concerned about their spending and what the stock performance will be very few people have an actual grasp of how the Federal Reserve Bank affects the economy and how an interest rate for a mortgage can be determined by a stock exchange that helps to set the rates people are paying for their homes.

While all of the mathematical equations and explanations are beyond the understanding of most people there is a connection to the amount of money people spend and what the interest rates will be for a home purchase or refinance. When it comes time to buy or refinance a home the interest offered to the borrower are the only thing that matter and it is up to the individual to secure and lock in the best interest rate possible by speaking to a mortgage lender and determining when and where the best time to refinance of buy a home may be. Although it is not an exact science a mortgage broker can help to find the best interest rates with the options of conventional, FHA and VA home loans.

Stock markets are notorious for their wild swings; many investors end up losing their shirts due to lack of experience. However, credible market intelligence can compensate to some extent for inexperience, warning new market entrants of potential pitfalls and protecting them from huge losses. It is here that full-service brokerage firms come into the picture.

Although the big houses charge relatively higher commission rates than the smaller, “call center” brokerage firms, they also provide a wider range of services – including intelligence on likely market trends. Such input is crucial for those who may be just entering the markets. Players of the commodity, foreign exchange, insurance, and mortgage markets can also take advantage of similarly packaged services.

Big brokerage firms generally provide a full range of services relating to stock markets, rather than just transact deals on behalf of their clients. They are available all the time to advise their clients on possible market movements. In addition, they can also provide insight about which stock would better suit your market game plan. Further, they can also guide you on when you should exit stocks of a particular industry and move over to another set so that you can optimize your gains. These firms can guide their clients through times of market volatility when predicting market movements could be fairly risky for ordinary players. They also provide customized services for their premium clients.

These full service brokerage firms are valued for reliability and authenticity of their data. This is because their inputs are based on thorough research and analysis, rather than on “experience” and gut instinct. Further, their research aims at capturing long and medium term trends along with short term market dynamics. However, small investors may find commission rates charged by full-service brokers prohibitively high, because of comparatively low turnover value. So, anyone playing the stock markets with less than $1,000,000 should instead consult the call center advisers.

The U.S stock market is made up of exchanges where stocks can be both bought and sold.

Some examples of exchanges are the NYSE (New York Stock Exchange), NASDAQ (National Association of Securities Dealers Automated Quotation System) and AMEX (American Stock Exchange).

NYSE is the largest stock market in the world, based on capitalization, with a yearly turnover of approximately US $10 trillion (about US $40 billion per day). It is made up of about 3,800 America’s listed companies.

NYSE Euronext, the holding company created by the combination of NYSE Group, Inc. and Euronext N.V. brings together six cash equities exchanges in five countries and six derivatives exchanges.

NASDAQ is another exchange comprising about 3,700 stocks, mainly in the biotech and technology industries, with a turnover of approximately US $27 billion per day.

AMEX is another exchange consisting of about 1,200 securities.

There are more than 10,000 additional securities available through the US national stock exchanges.

There are many different market indexes in the US markets. The main indexes used to measure the performance of the markets include the Dow Jones Industrial Average or DJIA, which includes 30 of America’s largest corporations.

There are many more indexes, such as the Standard and Poor’s 500 (S&P 5000) which measures 500 companies that are leaders in their respective industries.

Other indexes include the NASDAQ Composite Index, the AMEX Composite, and the Russell 2000 (made up of 2000 stocks) etc.

When we refer to the broader market, we are mostly referring to the DOW, NASDAQ and the S&P 500.

More strategies and resources on options trading can be found in my options training course.

So what is going on with all the mortgage companies? Either they are shutting their doors down or some of them stopped funding loans. For one, it all started with Alt-A mortgage loans and jumbo loans. Alt-A are loans which were made to borrowers whose credit score was not so perfect, that is right below 640 FICO, who were self employed, could not prove their income. Jumbo loans are loans that are above conforming limit of $417,000. Any loan amount that is below $417,000 is considered conforming loan and Fannie Mae and Freddie Mac, the two government backed companies are purchasers of these loans.

However; as you may have seen on TV, Alt-A loans and jumbo loans are loans that are causing problems as of right now as banks cannot sell these loans to open market, get additional funding to make new loans. So they are stuck. No Wall Street Investors are buying these loans and banks do not know what to do with its portfolios.

Subprime lenders, lenders that only specialized in Alt-A and jumbo loans could not find any investors to buy these loans and therefore liquidated their companies. So know the finger pointing starts!

Who is to blame? Banks for making these loans? Wall Street companies for buying and selling these loans even further? Or even customers that got those loans in the first place because they did not qualify for conforming loans? Or even mortgage brokers for pushing borrowers to get these types of loans.

There is no answer as who is responsible for these loans. It all started slowly with 1% loans and borrowers who started to default in a huge numbers. Than it escalated to all non-conforming programs and jumbo loans. But there is no way to know as how far this actually spread. Yes, we are not done yet!

This may get even uglier down the road as additional adjustable rate mortgages will reset soon again and it is expected that most borrowers will default again. Fed however, took one action this week by injecting billions to open market.

So far it is slowly working. Still volatile trading as you have seen news reports all over, but Fed is trying the best. But, what if Fed just lowered the interest rate, would that fix the problem? Yes and No. This is a really tough decision for Fed to make and the injection of funds into open market showed that Fed is watching and trying to help. If Fed lowers the interest rate today and later in a month additional adjustable rate loans are resetting and more borrowers defaulting, we would have the same exact situation. The problem is no one knows how many of these adjustable rate loans will actually reset, no one know how many people will default on these loans. All we have are simply estimates.

But than there is market. Most of the big mortgage companies are traded on stock exchange that has been effected by the current conditions, and of course market will react right away to this situation. Investors get scared, start to sell quickly in every sector, and leaves you with Dow loosing 100 points easily. Fed wants to wait until September meeting to either keep rate as is, or lower the rate. So far all indication leads that Fed may keep rates as is, but do not quote me on that.

So what is next for mortgage market? So far many banks have canceled many loan programs that dealt with jumbo loans and Alt-A loans to prevent any future risk. Some banks just simply closed its doors down without any notice. Some are still struggling and hoping that something will happen in the future to bring their portfolios back. And above all, housing market just killed home prices and many people own more on their mortgage than their property is worth. But it not all over yet!

What you see on TV, news, etc. are banks that are mostly backed by Wall Street Companies. However many mortgage brokers work with private investors that can still do Alt-A loans and jumbo loans. Loan criteria or qualifications may have changes little bit, but it is still possible to get a loan.

Right now, everyone will wait what Fed will do and hopefully they will make the right move.

Do you remember the NASDAQ stock market boom of the late 1990s? In March of 2000 NASDAQ hit its high of 5100. Stock market investors were thriving. Hundreds of thousands of people across America had quit their jobs to become day-traders. Many more had invested their savings and were celebrating the dream of certain wealth. By March of 2000 the mania had infected everyone from buttoned down Wall-Streeters to young Americans buying stocks for the first time.

But there were concerns. The Chairman of the Federal Reserve Board, Alan Greenspan, popularized the phrase, “irrational exuberance” in a speech in 1996, asking, “How do we know when irrational exuberance has duly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” His phrase would be echoed over the next several years, often angering investors who clearly wanted to keep the NASDAQ gold rush alive.

Within thirty-six months of its peak, NASDAQ had shed three-quarters of its value wiping out innumerable stock portfolios in its wake. Many of the victims could afford a little pain, but many of those that saw their savings evaporate would experience the meltdown as an irrecoverable setback. At the time of this writing NASDAQ has fought its way back to 2700, still nearly fifty percent down from its high of over seven years ago.

There are many parallels between the high flying high-tech stock market of the 1990s and the Florida real-estate rollercoaster ride of recent years. From 1990 until 2000 there was a reasonably steady near-ten-percent annual rise in Florida real estate values. By 2001 price appreciation was in the double digits. By 2003 Florida mortgage brokers, like myself, could barley keep up with the activity. All of our Florida mortgage clients seemed to be talking about getting rich in real estate.

In Mid-2005 Alan Greenspan, expressing concern about the U.S. Housing market said that, “at a minimum, there’s a little froth in the housing market, and it’s hard not to see that there are a lot of local bubbles.” The media picked up on the phrase, and before long we were all hearing about the real estate bubble. The local bubbles in the Florida market were most obvious in areas like Miami, Ft. Lauderdale, and the Port St. Lucie area, but other Florida mortgage brokers that I speak with were expressing concern about the fading affordability of home prices in all areas of the state.

In June of 2004 the Federal Reserve concerned about lurking inflation tapped the brakes with the first of seventeen quarter-point interest rate hikes. In December of 2006 even the most die hard real estate optimists were facing reality. The Florida real estate market had shifted from overdrive into reverse. As it stands today sellers are struggling. And in spite of continued low Florida mortgage interest rates, buyers are affected by the gloom and are hesitant to jump in. And of course, many of the potential buyers are sidelined sellers waiting to be liberated from their current home.

I’m not really a contrarian, but I’m thinking that the pessimism that we are observing in Florida is a clear signal that we are near the bottom. In my observation the moment that all indicators point one direction we are about to go the other way. I think back to the final days of the NASDAQ mania. I remember feeling a bit ill one day after a particularly young and innocent mortgage customer asked me to check my computer for the price of the dot-com stocks in his IRA. The ship had sailed, everyone was on board and I could smell the iceberg.

As a Florida mortgage broker I speak to people all day long about real estate. Recently I’ve noticed that many of the long time optimists have given up. You know the old saying about it being darkest before the dawn? I say that the sun is on the way. My intuition may be a bit questionable, but there is some common sense at work here as well. The markets are driven by psychology. Prices are always highest at the peak of demand – and high demand always sustains an inflated sense of value. Prices are lowest when demand is the least – and when demand is down sellers lose their belief in value. By the time that everyone is perceiving value in Florida real estate again the prices will be far less accommodating. Time will tell…

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.

There is always going to be debate amount investors over the returns on Real Estate vs. the Stock Market. Each side has their valid points and it is mostly going to be up to the investor to make his own decision.

Real Estate has a long history of being a stable and secure investment. The Stock Market, by comparison is a relatively new creation. The value of land and property dates back to the very beginning of recorded history, but does this ancient historical value really have much to do with today’s investment market. The supporters of the Stock Market will be quick to point out that they recognize Real Estate’s historical value, but will be quick to point out that “that was then, and this is now.”

When you take a look at the average return on investment (ROI) figures for the modern era from 1926 to 1996, you find that it is pretty close to being a tie. Small stocks slightly outperformed Real Estate during this period, 12% to 11%, although Real Estate edged out the Dow Jones Industrial Average by 11% to 10%. These figures indicate that there is not much difference between Stock Investments and Real Estate Investments according to historical return figures.

There are several major differences between the management of both investments. Stocks are easily transferred. They can be bought in smaller lots or large lots. There is much similarity between Stocks of different types. Real Estate investments take a bit of time and effort to complete the transactions. The transactions costs tend to be high. The idea of an inexpensive piece of Real Estate does not mean anything at all the same as an inexpensive share of Stock. All of these factors seem to point to Stocks as being better.

But administrative details and transaction costs do not have anything to do with the rate of return. In fact, if initial costs on Real Estate transactions are higher, and historically they end up performing as well, it is obvious that once they are in your portfolio, they are going to outperform most Stocks. Also, the trick to successful investing is not graphing what happened in the past, but predicting what is going to happen in the future.

One of the most compelling arguments for Real Estate investment is the matter of finite space. There is only so much land and only so much improvement can be made to it. Corporations and other types of business entities have no such finite limit. The expansion of the Stock Market into the electronic world that led to the “dot.com” bust recently is an example. Since Real Estate has limits on its ability to expand, it would seem likely that it will continue to increase in value as it grows more and more scarce. Real Estate managed to hold its own against the Stock Market during the period of the Stock Market’s great advancement and growth. The future could very well belong again to the Real Estate investor as it once did in the past.

Should You Invest in the Stock Market Or Real Estate Now?

An ancient philosopher once said “May you live in interesting times”, and we certainly live in interesting times these days! The recession that began towards the end of 2008 and has stretched into 2010 with little signs of lessening anytime soon has made us all stop and think about our investments in many different ways.

When the recession began the first thing that crashed was the stock market. Many people suggested that this recession was fueled by the financial sector meltdown. They were talking mainly about regular banks and also investment banks as well. For whatever the reason, the stock market became a very dangerous place to invest in at the beginning of the recession.

While the stock market has come back to a large degree since its lows during the beginning of the recession, it’s still a rather dangerous and precarious place to keep your money. Or is it?

Once people started digging a little deeper they realized that the financial sector was melting down because the housing sector and the real estate sector had become massively overheated… what we commonly refer to as a bubble that had finally popped. It was the default of thousands upon thousands of mortgages, to a large degree, that caused the banks to meltdown in the first place, which then caused the stock market to crash.

It’s very convoluted and even today we are still not entirely sure which came first the chicken or the egg; the housing market meltdown or the banking sector meltdown, but it doesn’t really matter because the question that remains is this: what in the world can we invest in now that the two main investment industries, the stock market and real estate, have imploded?!

Well that’s a very good question and it’s exactly what I wanted to discuss in this article today.

Some of the best times to invest, historically speaking, are when everybody else is panicking and certainly we’ve seen a lot of panic within the last couple of years. Does that mean it’s time to get back into the stock market or the real estate market? Maybe…

The fact of the matter remains that there are some incredible deals out there in both the stock market and the real estate market. I know many investors who have invested heavily in real estate who are now underwater with their mortgages because the properties are no longer paying off the same level of income that they use to.

This is because of several different reasons including their inability to keep tenants who’ve lost their jobs because of the recession and their inability to refinance mortgages at lower rates because the credit markets are still frozen to a large degree.

What all that means is that if you have money available at the moment, there are great bargain basement deals to be had in both the stock market and the real estate market, you just have to be smart, do your homework, and take advantage of a little bit of luck!

After passing through a tumbling situation in the recent past, which left the mortgage market shocked (as the short term mortgage rates shot higher), the Federal Reserve has made it possible for them to get back on the normal track.

The Federal Reserve slashed benchmark interest rates by half a point in an aggressive move, thus tightening the credit conditions, providing potential to intensify the housing correction and preventing the economy from moving into recession. The decision to cut overnight federal funds rate from 5.25% to 4.75% was unanimous. This is the lowest level since May 2006 and the first time the fed has cut interest rates since June 2003. It was the first ½ point cut since November 2002. The fed also lowered its discount rate it charges from banks for direct loans by the same percentage.

Short term mortgage rates, which had been rising, sometimes very sharply over the last few weeks fell a bit. Even the long-term rates had an unexpected change showing a healthy decline, according to the Mortgage Bankers Association and Primary Mortgage Market Survey. However:

- The short term 1 year ARM decreased to 6.34% from 6.52% with points remaining unchanged at 0.93.

There was a dramatic drop in the 30 year fixed rate mortgage (FRM), from 6.42% with 1.09 points to 6.25% with 1 point.
The average contract interest rate for 15-year FRM had a decrease from 6.10% with 1.16 point to 5.9% also with 1.03 point.
The five-year Treasury indexed hybrid adjustable rate mortgage (ARM) had an average contract interest rate of 6.32% with 0.6 point with a modest change from a rate of 6.35% with 0.6 point.
One year Treasury indexed ARMS after jumping 24 basis points to 5.84% with 0.8 point, it settled down and gave back ten of those basis points, averaging 5.74%with 0.6 point.
Mortgage application volume that has increased to 5.5% on a seasonally adjusted basis was down to 16.7%.

On the other hand, refinancing as a major part of total mortgage activity was up to 42.1% from 41.4%. But, the market share of the ARMs continued to drop, representing 12.6% of total application compared to 13.2% before.

The Federal Reserve Board’s decision to cut the federal funds rate by 50 basis points proved good medicine for many ailing mortgage related stocks.

According to the other latest updates, nationwide foreclosure fillings jumped 36% led by sharp increase in Sunbelt states where inflated home prices are the driving factor. California, Florida, Nevada and Arizona drove the rate of mortgage loans entering foreclosure nationwide to a new record.

During the second quarter, loans entered the foreclosure process at a record rate of 0.65% compared with 0.58% during the previous quarter.

Dow Jones Industrial Average – What is Going on With the Stock Market?

The stock market has taken a huge hit recently. It is a tough time on Wall Street. What has happened to the stock market? The stock market is impacted by market trends. Many Americans have decided not to invest in the stock market due to the down turn in the United States Economy.

The housing crisis has had a huge impact on the United States economy and the stock market. Many homes are being foreclosed on or are going to be foreclosed on. This is happening because of predatory mortgages.

Predatory mortgages are when lenders give a mortgage to someone who cannot afford it. Now, because of the high prices of gas and food people cannot afford to pay their mortgages so their homes are being foreclosed on.

When homes are foreclosed on the banks take a huge loss which they have to try and absorb. Many banks have needed government assistance because they cannot stay afloat during this economic crisis. Even huge banks such as Wachovia and Washington Mutual needed to be taken over by larger banks in order to stay afloat.

The stock market is suffering because of doubts surrounding the health of the economy. If consumer spending is down then companies will not do well so their stock prices will drop significantly. The stock market needs to recover and we can all do our part by trying to stimulate the economy by visiting stores, movie theaters and restaurants. We should also look into investing into inexpensive stocks to help undo some of the damage on Wall Street.

Hopefully, the stock market will recover all of us depend on it to survive in today’s economy..